Bank of England Gov. Mark Carney issued a plea to finance ministers and central bank governors this month to get behind efforts to fix one of the thorniest issues in postcrisis financial reform: how to handle the collapse of a bank that operates in many different countries.

As chairman of the Financial Stability Board, the Group of 20 developed and developing economies’ task force on financial regulation, Mr. Carney wrote April 4 asking for policy makers’ support in the final push to come up with a workable blueprint for “cross-border resolution,” according to a letter published by the FSB Friday.

Cross-border resolution is an important part of the FSB’s work to end the problem of banks that are “too big to fail,” those firms that are so gigantic that taxpayers have to step in to bail them out when they get into trouble, or risk financial meltdown.

Big firms that straddle national borders present additional problems for regulators: who exactly should take the hit when things go wrong? Which regulator should take the lead in sorting it out? What happens if different regulators disagree over what to do? Whose laws are applied when things go awry?

“Your support is needed to ensure that national authorities are empowered to cooperate fully with their counterparts in other countries, including by recognizing foreign resolution actions and ensuring that debt issued under foreign law includes contractual recognition provisions so that bail-in is effective in a cross-border context,” Mr. Carney wrote in the letter, hinting at a couple of areas where the FSB sees potential pitfalls. Bail-in refers to the enforcement of losses on creditors to recapitalize a failing bank.

Mr. Carney and the FSB aim to present world leaders with a plan to eliminate the too-big-to-fail problem once and for all by the end of the year. His letter said the FSB intends to make a formal proposal to the G20’s summit at Brisbane in November for a global standard on what regulators call “gone-concern loss-absorbing capital”, along with minimum requirements for systemically important banks. This so-called GLAC can often include instruments other than common equity, such as subordinated or convertible debt. Higher levels of GLAC would give regulators more confidence that a cross-border bank fail without causing a crisis, he said.

Also on the FSB’s agenda is tackling the murky world of “shadow banking,” where non-regulated firms act much like banks and could pose a risk to the financial system, as well as improving derivatives markets.

The board is looking at overhauling its membership, which numbers 70 or so of the world’s finance ministries, central banks and regulators. Mr. Carney’s letter said members didn’t want to broaden membership much for fear of weakening the organization’s effectiveness, but were open to inviting authorities who are not currently members to participate in some of its work where relevant.

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